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Happy Sunday, future bankers!

Hope everyone is doing well! Today we’re covering intuition behind betas, the purpose of investment bankers, and the stock market’s hot start to March.

🚀 Let’s get into it.

🔢 Technical Question

Which company would you expect to have a higher beta, a biotech company or a manufacturing company?

Beta is a measure of a stock’s risk in relation to the market. A beta less than 1 indicates that the investment is less volatile than the market, while a beta greater than 1 indicates that the investment is more volatile.

Generally, you’d would expect a biotech company to have a higher beta than a manufacturing company. This is because biotech companies are often characterized by high levels of uncertainty. They are typically in the research and development stage for many of their products, and it’s uncertain whether these products will be successful or not. This uncertainty translates into higher volatility and therefore a higher beta.

On the other hand, manufacturing companies tend to be more stable and have more predictable cash flows, which leads to lower volatility and a lower beta. However, it’s important to note that this is a generalization and the actual beta would depend on the specifics of the individual companies being compared.

🗣 Behavioral Question

What is the purpose of investment bankers?

Investment bankers play a crucial role in the financial sector. They act as intermediaries between entities that need capital, such as corporations and governments, and investors who have capital to invest.

1. Capital Raising: One of the primary roles of investment bankers is to help organizations raise capital. They do this by issuing and selling securities in the capital markets. This could be through initial public offerings (IPOs) where companies are taken public, or through bond offerings where debt is issued to investors.

2. Mergers and Acquisitions (M&A): Investment bankers advise companies on strategic transactions such as mergers, acquisitions, and divestitures. They help in valuing the target company, structuring the deal, and negotiating the terms.

3. Financial Advisory: Investment bankers provide strategic financial advice to companies on a variety of financial matters such as restructuring, spin-offs, and financial strategy.

4. Risk Management: They also play a role in managing financial risk by creating financial products that enable their clients to hedge against potential losses.

🗞 Industry News

The Stock Market’s Hot Start to March 🔥

Wall Street kicked off March on a positive note, with stocks reaching new record highs. Promising inflation data and a continuing tech rally were the catalysts for the surge. Nvidia made headlines by becoming the first tech company to cross a $2 trillion market cap. The S&P 500 continued its strong performance, rising for the 16th time in 18 weeks, while both the Dow Jones Industrial Average and the Nasdaq also saw gains.

While inflation numbers showed positive signs of cooling, potentially easing pressure on potential Federal Reserve interest rate hikes, there are still indications of "sticky" inflation. Nvidia's market cap milestone highlighted the ongoing excitement around AI in the tech sector. New York Community Bancorp faced a significant drop due to a CEO departure, a large quarterly loss, and weaknesses identified in its loan processes. Dell fared better, posting sales and profit figures above expectations. Finally, the AI industry saw additional developments as Elon Musk sued OpenAI (backed by Microsoft) over a breach of contract, and OpenAI is reportedly looking to add new board members soon.

Read more about this story below.

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Thanks for tuning in today! Best of luck to everyone working through recruiting right now. If you sign an offer, reply to this email and let us know about it! Like seriously, do it—we’d love to hear about it!